On Marketing, Real Estate, and Technology

Why Are MLS’s Monopolies?

So here I am cruising the Interwebs, checking out various posts from around the RE.net, and I run across this jewel of a post from Marc Davison and Brian Boero, then gents behind 1000watt. The post itself is interesting reading, and I’m not sure if I agree 100% or not, but there’s much food for thought there.

What I find even more interesting is in the comments, where a Greg Tracy (seems, of Blueroof.com) writes (among other things):

Don’t mistake my candor for pure bittnerness- this is about transparency and telling it like it is- from the perspective of someone who pays over $12,000/year to my local MLS (as an agent) to use the data for my website. Think about that- I pay $300/year in dues to the MLS, give them my listing data and then have to pay $12,000/year just to display the MLS data on my website. And I have to jump through all of their stupid restrictions and rules. I can’t show agent remarks on my website even though agents can show them to their own clients. I cannot show sold data, even though agents can show this to clients in a CMA. These are restrictions that the MLS doesn’t have to impose on itself, and does not impose on their “partner” Realtor.com. But there is nothing that I, or anyone can do about it because they are a monopoly. (Emphasis mine)

And I got to wondering… why the heck is this MLS a monopoly? I mean, as Greg himself points out earlier in his comment, MLS’s are for-profit ventures seeking to make money from membership dues and whatever ancillary revenue streams. They aren’t governmental entities. They are not granted — as far as I know — charters by any level of government to operate a monopoly.

The technology involved in a MLS these days is trivial. A reasonably competent database programmer could probably set it up over a weekend.

Why aren’t we seeing tons of MLS’s popping up all over the place to compete for Greg’s (and other disgruntled current consumers’) business?

Is it a network effect issue, where once all the realtors in a given area are on a particular MLS, the game is over? (Like eBay?) Is it a finance issue, where the profits from operating a MLS are so low that entrepreneurs aren’t tempted to offer a better service experience at lower cost?

Greg is a pretty serious tech guy if he created Blueroof.com — why isn’t he just creating a competing, for-profit, MLS premised upon “Better service, at lower price” and stealing the crap-MLS’s lunch? No politics — Greg owns the damn thing; he’s responsible, and he’ll reap the profits when they come.

This is a serious question. I just can’t understand why these MLS’s, who are apparently so poor at serving their customers (brokers and agents) and are charging far too much to provide crappy service, aren’t going bankrupt due to nimbler, more customer-friendly competitors.

Like any industry there are great MLSs and not so great MLSs. From our experience consulting with several MLSs around the country and conducting member satisfaction research, though, satisfaction levels are much higher than suggested by blueroof.

While all MLSs, like all service providers, can certainly continue to improve their satsifaction levels – most are providing services which meet their member’s needs. WAV Group has survey data from thousands of REALTORS – and we can say confidently that REALTORS are pleased with their MLS services. I know that’s probably not as interesting as the “horror” stories shared by some, but that is what satisfaction data suggests.

I disagree with the notion that MLSs are money-grubbing for profit capitalists. The fees paid to MLSs around the country also differ greatly. Many of the largest and most well-run organizations in the country are offering a variety of very reliable and robust services for $30 or LESS per month. Some offer as many as 9 or 10 services which help realtors offer professional, real-time responsiveness to their clients. Remember that the MLS fee can include MLS, Tax, Document Management, Showing Appointments, client portals, efax, consumer websites, data syndication, customer support, research and development, reserve accounts, and more.

While many MLSs ARE structured as for profit organization, many follow the NAR mantra to provide services without chasing significant profit. In the face of reduced membership, many are cutting budgets to hold fees down. There are some that are raising fees, but none that we’re aware of are charging fees even close to the cost of ubiquitous technology providers like cell phone or cable companies are charging these days.

Today we see the emergence of Association of Choice and MLS of choice – concepts promoted by the National Association of REALTORS. You can easily look to California to see an example of REALTORS having a variety of choices when it comes to MLS Membership. Los Angles area MLSs now allow brokers or agents to join any one of 5 MLS that are members of CARETS – a shared database with a front end MLS system of choice. Soon there is likely to also be an option of a Statewide MLS. Although MLS of Choice is a new concept, data sharing and front end of choice options are springing up all across America This seems to unravel the argument constructed in the title of this thread suggesting that “MLSs are Monopolies” today.

I also do not believe that any programmer could build a MLS database over the weekend. Even if it could be built, the business of providing a MLS system is a whole lot more than simply deploying a database. The maintenance, business rules, management and protection of the information is where the MLS creates is value. Without this service, the real estate community could not operate it as we know it today. If the MLS is doing such a bad and irrelevant job, how come every VC-financed start-up is courting them for their data?

Take a look at Europe, for example, There is virtually no cooperation in this region and it creates pure chaos for consumers and for the real estate industry. Homes can be listed for two prices from two different real estate offices. No office has all of the inventory in any region so a real estate consumer has to visit several offices and hope they have seen all of the homes available. I think the MLS has created a significant value relative to this disorganized model.

With all of that said, there are still ways for MLSs to improve their relevance. First, there is a lot of room for them to become more sensitized to the needs of their subscribers. Some do have too much focus on “compliance” and project an attitude like the DMV. Some could project better attitudes and more flexible and adaptable policies.

Second, there could do a much better job of building relationships with their subscribers. They can do more individual outreach to brokers, agents and offices. They can also leverage web 2.0 technologies to create a better dialog with their customers. Many REALTORS do not even know the name of their MLS provider. When we ask the name of MLSs, many times we hear “paragon” or “mlxchange” or “xyzassociation”.

Third, MLSs need better methods for monitoring satisfaction levels. We have helped several MLSs implement satisfaction benchmarking programs to monitor satisfaction levels consistently. These programs include measuring real-time satisfaction levels for all communications with the MLS. They measure awareness, perceived relevance, adoption and satisfaction of the services offered. In other words, they do a really good job of staying in touch with the emotions and needs of their customers.

So, suppose that someone were to start a third competing MLS… let’s call it BNIXMLS. BNIXMLS charges 30% less than GAMLS, and FMLS. It offers very relaxed display rules, patterned after something like Creative Commons. (Just acknowledge the listing broker, and that’s it.) It offers feed output in a variety of formats, from .csv to XML to RETS and so on.

Instead of charging $12,000 a year for a feed, BNIXMLS charges something like $1,200 a year — or, being that this is the 21st century, it charges $0.002 (2/10ths of a penny) per record downloaded via XML web services.

And BNIXMLS is run by a guy who cares about keeping his customers happy, so he offers top-notch customer service.

I’m trying to understand why BNIXMLS wouldn’t swiftly put both GAMLS and FMLS out of business — or at a minimum, force them to raise their game to stop the flood of customers leaving them for BNIXMLS.

I suspect Tony Longo has sketched part of the answer: the vast majority of agents/brokers in a given market are uneducated and don’t care. In fact, I suspect that part of the reason why some MLS’s have restrictive rules is that their members demand them.

In my previous life (at Windermere), I spent a good 10 years bouncing around from board to board trying to convince brokers to adopt IDX, or, give us data under reasonable terms once they had passed the rules (Greg, I feel your pain). In almost every market the political process was 10x the technical challenge.

That said, we generally found it to be less effort to change the rules inside an existing MLS (simple majority vote), than to try the ‘alternate MLS’ approach (95% threshold to work).